Last week I saw a little piece of news that seems tailored not only to stressed out potential home sellers in San Francisco, but potentially cannonfire in the battle between real estate websites (which were recently dismissed as time-consuming fantasy portals in this space) and Real Real Estate Agents: Redfin announced that it will expand its RedfinNow home buying service – the kids call it “iBuying” – to Seattle and San Francisco. Having worked in the secondary markets since 2017, RedfinNow was ready to move into the big leagues.
Are these the first signs of the revolution? Why bother selling our home with a realtor when a lot of money is just a click away? And what the timing of RedfinNow, when you step into the San Francisco market at a time you are selling your home, all of a sudden there is no longer a slam dunk rocking the backboard. Which stressed out seller would not consider this option?
As we discussed last time, real estate portal sites like Redfin (Zillow, Movoto, Trulia, etc.) aim to “revolutionize” the real estate industry through technology. That the revolution would cause brokers to lose their place at the center of real estate transactions was a stated goal of Richard Barton when he founded Zillow in 2006. Consumers already have access to information that has traditionally been the exclusive property of licensed real estate agents. Is RedfinNow, which completely eliminates the need for an agent, the fatal blow?
To quote the great Pee Wee Herman, “Everyone has a big but,” and here is mine: This is a great service for a limited audience of sellers. In short, it works if you had to get rid of your home for some reason yesterday and you don’t know exactly how much money you are making, a very nifty and legitimate version of Cash For Your Home! “Flyers find a solution in their mailboxes for anyone whose decision to sell their home is made out of expediency – or even desperation.
Here’s how it works: You go to RedfinNow, request a quote, upload some photos, and a few days later your quote will arrive. If you like the offer, choose a deadline within 30 days, wait for an inspection, and close the deal hassle-free and worry-free.
The catch is that, much like Doorstead, the property management service I wrote a few months ago, RedfinNow trades convenience and security for profits. They are at the forefront of this and even recommend on their website that sellers “seek independent representation” and that they “may be able to sell (their) home on the open market for more than RedfinNow’s asking price”. Like Doorstead, RedfinNow ultimately costs you money.
Additionally, there are the tertiary issues of repairs and closing costs traditionally used by real estate agents in the final stages of a transaction. Chestnuts are passed back and forth by agents to bridge the gap between their customers during a “normal” deal. Deal. With RedfinNow, recommended repairs become work orders that are paid for by the seller, then added to the closing cost and subtracted from the bottom line.
There is no flame here. RedfinNow puts it on their website and estimates that the cost of the service is 6 to 15 percent of your (already reduced) profit, while a broker costs between 6 and 12 percent. But again, this is the trade you make, and it is a trade that works for a certain type of seller. But will this seller fit into RedfinNow’s guidelines for doing business in San Francisco?
For now I will say no. Eligibility, which is limited to single-family homes or townhouses built between 1930 and 2018 and valued between $ 300,000 and $ 1.2 million, is in a Victorian city where single-family homes make up only 30 percent of total living space and have an average value, not realistic, of $ 2.2 million.
We can assume that this is a pilot program and that RedfinNow plans to expand these criteria to something more realistic. Right now, RedfinNow probably isn’t unless you’re going into witness protection and just need to discharge your house. t an option. Right now, any hype about RedfinNow expanding into San Francisco is essentially controversial.
But this is not a scam, and it is not something to be taken lightly.
It’s a very specific solution for a very specific buyer, but it could be something more. And while it’s not a death knell for brokers, it’s a shot over the bow, the latest in the war between humans and technology.
Larry Rosen is a San Francisco-based writer, editor, podcaster, and former broker. He is a guest columnist and his point of view is not necessarily that of the reviewer. Market Musings’ property column is displayed every two weeks.
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